Prime Electronics, a division of Boisvert Corporation, manufactures two large-screen television models: the Mammoth, which has been produced in 2016 and sells for $977, and the Maximum, a newer model introduced in early 2018 that sols for $1.257 Click the icon to view additional information) Prime's controller, Sam Information about the com Jackson shows the resul (Click the icon to vie Click the icon to vie Read the requirements Requirement 1. Using activity-based costing, calculate the gross margin per unit of the Maximum and Mammoth models. Begin by calculating the total cost of goods sold for each model (Round intermediary calculation to the nearest cant) Mammoth Maximum Direct costs Direct materials Direct manufacturing labor Machine costs Total direct costs Indirect costs Soldering Shipments Quality control Purchase orders Machine power Machine setups Total indirect costs Total cost of goods sold Now calculate the total gross margin and gross margin per unit for each model using activity-based costing (Round the per unit amounts to the nearest cant) Mammoth Maximum Gross margin-total Gross margin per unit 0 sed Prime's controller, Sam Jackson, is advocating the use of activity-based costing and activity-based management and has gathered information about the company's manufacturing overhead costs for the year ended November 30, 2020. After completing his analysis, Jackson shows the results to Curt Cooper, the Prime division president. (Click the icon to view the ABC data.) (Click the icon to view Cooper's response.) Read the requirements. - More Info Based on the following income statement for the year ended November 30, 2020, senior management at Boisvert have decided to concentrate Prime's marketing resources on the Maximum model and to begin to phase out the Mammoth model because Maximum generates a much bigger operating income per unit. Prime Electronics Income Statement for the Fiscal Year Ended November 30, 2020 Mammoth Maximum Total Revenues $ 23,448,000 $ 7,542,000 $ 30,990,000 Cost of goods sold 15,002,400 5,281,200 20,283,600 Gross margin 8,445,600 2,260,800 10,706,400 Selling and administrative expense 5,862,000 1,508,400 7,370,400 Operating income $ 2,583,600 $ 752,400 $ 3,336,000 Units produced and sold 24,000 6,000 Operating income per unit sold 107.65 $ 125.40 Details for cost of goods sold for Mammoth and Maximum are as follows: Mammoth Maximum Per Unit Total Direct materials Direct manufacturing labor Machine costs Total 5,474,400 $ 504,000 3,744,000 228.10 $ 21.00 156.00 (a) Per Unit 643.20 49.00 78.00 3,859,200 $ 294,000 468,000 (b) More into TOVO VOLVO 5,281,200 30,300.00 20,283,600 2,260,800 1,508,400 20.000 Cost of goods sold 15,002,400 Gross margin 8,445,600 Selling and administrative expense 5,862,000 S Operating income 2,583,600 $ Units produced and sold 24,000 Operating income per unit sold 107.65 $ Details for cost of goods sold for Mammoth and Maximum are as follows: 10.706,400 7,370,400 3,336,000 752,400 $ 6,000 125.40 Mammoth Maximum Total Per Unit Total Per Unit Direct materials 5,474,400 $ 228.10 $ 3,859,200 $ 643.20 Direct manufacturing labor 504,000 21.00 294,000 49.00 Machine costs 3,744,000 (6) 156.00 78.00 468,000 Total direct costs $ 9,722,400 $ 405.10 $ 4,621,200 $ 770.20 Manufacturing overhead costs (c) 5,280,000 220.00 660,000 110.00 Total cost of goods sold $ 15,002,400 $ 625.10 $ 5,281,200 $ 880.20 (a) Mammoth requires 1.5 hours per unit and Maximum requires 3.5 hours per unit. The direct manufacturing labor cost Is $14.00 per hour (b) Machine costs include lease costs of the machine, repairs, and maintenance. Mammoth requires 8 machine-hours per unit and Maximum requires 4 machine-hours per unit. The machine-hour rate is $19.50 per hour. (c) Manufacturing overhead costs are allocated to products based on machine-hours at the rate of $27.50 per hour. (Click the icon to view the ABC data.) Data Table Activity Center (Cost-Allocation Base) Total Activity Costs Soldering (number of solder points) $ 1,065,000 Shipments (number of shipments) 1,261,000 Quality control (number of inspections) 1,141,000 Purchase orders (number of orders) 1,170,000 Machine power (machine-hours) 57,000 Machine setups (number of setups) 1,246,000 Total manufacturing overhead 5,940,000 Units of the Cost-Allocation Base Mammoth Maximum Total 1,195,000 225,000 1,420,000 15,600 10,400 26,000 50,900 19.100 70,000 85,400 109,600 195,000 173,400 16,600 190,000 16,300 18,700 35,000 B el More Info al Cooper does not like what he sees. "If you show headquarters this analysis, they are going to ask us to phase out the Maximum line, which we have just introduced. This whole costing stuff has been a major problem for us. First Mammoth was not profitable and now Maximum isn't. "Looking at the ABC analysis, I see two problems. First, we do many more activities than the ones you have listed. If you had included all activities, maybe your conclusions would be different. Second, you used number of setups and number of inspections as allocation bases. The numbers would be different had you used setup-hours and inspection-hours instead. I know that measurement problems precluded you from using these other cost-allocation bases, but I believe you ought to make some adjustments to our current numbers to compensate for these issues. I know you can do better. We can't afford to phase out either product." Jackson knows that his numbers are fairly accurate. As a quick check, he calculates the profitability of Maximum and Mammoth using more and different allocation bases. The set of activities and activity rates he had used results in numbers that closely approximate those based on more detailed analyses. He is confident that headquarters, knowing that Maximum was introduced only recently, will not ask Prime to phase it out. He is also aware that a sizable portion of Cooper's bonus is based on division revenues. Phasing out either product would adversely affect his bonus. Still, he feels some pressure from Cooper to do something ri Requirements 1. Using activity-based costing, calculate the gross margin per unit of the Maximum and Mammoth models. 2. Explain briefly why these numbers differ from the gross margin per unit of the Maximum and Mammoth models calculated using Prime's existing simple costing system. 3. Comment on Cooper's concerns about the accuracy and limitations of ABC. 4. How might Prime find the ABC information helpful in managing its business? 5. What should Sam Jackson do in response to Cooper's comments